Industrial Production Falters In January

Industrial production slipped back in January, according to data issued within the past hour by the U.S. Commerce Department. Specifically, such output declined by 0.3% last month. Expectations had been that production would have increased by 0.4%. Worse, although industrial production's 0.3% increase for December was not revised, the initially estimated output gain of 1.0% for November was pared back to just 0.7%.

As with most of the recent data, much of the blame was placed on the weather. According to the government, the cold weather and accompanying heavy snows led to a 0.8% decline in manufacturing activity last month. Mining output, one of the three categories, along with manufacturing (the largest component) and utilities, fell 0.9% in January. These declines more than offset the 4.1% rise in utilities usage last month.

Meanwhile, manufacturing had strung together a succession of monthly increases. However, mining output, which tends to be more volatile, has been up and down in recent months, gaining solidly in November and December, after having plunged by 1.5% in October. As to the utilities component, as noted, it jumped by 4.1% in January. That strong gain, which, obviously, reflected higher usage due to increased heating of homes, followed a drop of 1.4% in December, but a 2.9% advance in November.

As to the other part of this report, namely factory utilization, this component also eased in January, likewise, presumably, because of the weather. On point, the nation's factories operated at 78.5% of capacity last month, down from 78.9% the month before. Use had been edging up for much of the past year, having risen in a straight line from last August, when the total had been 78.0%.

Breaking this segment of the overall report down to its component parts we find that manufacturing use fell from 76.7% of capacity in December to 76.0% last month. Mining usage also fell, but, to no one's surprise, utilities utilization climbed, rising from 80.1% of capacity to 83.3%.

Taken as a whole, this was a disappointing report. However, if the assumption that this backtracking was due largely to the weather is borne out, then we could have an acceleration in growth again by the spring. Should the picture be more complicated, we would likely need to revisit our projections.

At the time of this article's writing, the author did not have positions in any of the companies mentioned.